RBA Minutes Fail to Dent Australian Dollar Demand

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Headlines

  • Mildly Upbeat RBA Minutes Encouraged Australian Dollar – Weaker Westpac leading index may reverse gains
  • Disappointing UK Government Borrowing Figures Weighed on GBP Rates – Tension mounts ahead of Budget announcement
  • German Political Worries Continued to Hamper Euro – Eurozone’s powerhouse looks set for fresh round of elections
  • US Dollar Faltered In Spite of Positive Housing Data – USD upside remains limited

Australian Dollar

Although the Reserve Bank of Australia (RBA) signalled continued concern over the sluggish state of domestic wage growth this failed to particularly weigh on the ‘Aussie’. Markets were instead encouraged by the fact that the November meeting minutes were slightly more upbeat in tone than anticipated, suggesting that an interest rate cut is not currently on the cards. As the ANZ Roy Morgan weekly consumer confidence index also picked up solidly the mood towards the Australian Dollar naturally improved.

Unless the Westpac leading index points towards an acceleration in economic growth on the month, though, AUD exchange rates may struggle to maintain this optimism for long.

Sterling

Further pressure was heaped on Chancellor Philip Hammond ahead of his Budget announcement as the UK public sector net borrowing data proved discouraging. Investors were not impressed to find that the monthly deficit had unexpectedly risen to 8 billion in October, underlining the weaker state of the nation’s finances. With Hammond already facing limited room for manoeuver this weaker showing suggests that the Budget is unlikely to have any significant economic stimulus, keeping the Pound on a general downtrend.

If the Budget serves as a flashpoint of fresh political tensions and the Office for Budget Responsibility lowers its growth forecasts this could extend Sterling’s losses further.

Euro

With the odds of a fresh German election mounting, after Chancellor Angela Merkel expressed a lack of interest in forming a minority government, the Euro remained under pressure. There are naturally concerns over the thought of further months of political uncertainty within the Eurozone’s key economic player, potentially putting a dampener on growth. This could also limit the European Central Bank’s (ECB) willingness to consider returning to a monetary tightening bias, further diminishing the appeal of the single currency.

Any upwards revision to the finalised Eurozone consumer confidence index for November may offer the Euro some support, however.

US Dollar

While existing home sales strengthened by a robust 2% on the month in October the mood towards the US Dollar still soured. Even as the impact of the hurricane season continued to fade the ‘Greenback’ struggled to find fresh traction against its rivals. In part this is due to the recent bullishness of USD exchange rates, which have eroded any upside potential as markets priced in the odds of an imminent Federal Reserve interest rate hike.

As durable goods orders are forecast to have faltered on the month this could add to the more bearish mood of the US Dollar tonight.

Canadian Dollar

In a fresh blow to confidence in the health of the Canadian economy, September’s wholesale trade sales slumped sharply on the month. As sales volumes fell -1.2% this suggests that activity within the domestic economy is slowing, something which should keep the Bank of Canada (BOC) on a neutral policy bias. However, recovering oil prices and a weaker US Dollar helped to keep CAD exchange rates from seeing any particular losses overnight.

Even so, if the latest US crude oil stockpiles data points towards an increase in output the Canadian Dollar may soon return to a weaker footing.

New Zealand Dollar

As New Zealand credit card spending picked up on the month this helped to boost NZD exchange rates on Tuesday. Signs of resilient consumer confidence encouraged investors to buy back into the antipodean currency, particularly as the US Dollar deteriorated. While the latest Global Dairy Trade auction proved rather discouraging this was not enough to dent the ‘Kiwi’ at this stage.

In the absence of any fresh domestic data, though, the New Zealand Dollar remains vulnerable to renewed downside pressure.

Data Released

November 22nd 09:30 AUD Westpac Leading Index (MoM) (OCT)
November 22nd 22:30 GBP Chancellor Hammond Presents Budget to Parliament
November 22nd 23:30 USD Durable Goods Orders (OCT P) 0.4%
November 23rd 01:00 EUR Eurozone Consumer Confidence (NOV A) -0.9

Post by TorFX

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